Bloomberg News

BIDV Delays Debut on Vietnam Market Slump: Southeast Asia

June 20, 2012

State Bank of Vietnam Govenor Nguyen Van Binh

Nguyen Van Binh, govenor of the State Bank of Vietnam. Photographer: SeongJoon Cho/Bloomberg

Bank for Investment and Development of Vietnam, the country’s second-largest lender, said it will delay a planned trading debut until the third quarter after a slide in the benchmark VN Index.

BIDV, as the lender is known, sold a 3 percent stake in an initial public offering in December and had planned to begin trading on the Ho Chi Minh City Stock Exchange on June 26. The stock will debut by Sept. 30, BIDV Deputy General Director Pham Quang Tung said in an interview June 19. Vietnam allows companies to delay listings for as long as a year after IPOs.

“Stock-market conditions are still not very favorable, so listing at this time may negatively affect the stock value as well as hurt shareholders and investors,” Tung said. “We expect the trend in the market will be clearer in the third quarter, and will recover well in the second half.”

Vietnam’s VN Index (VNINDEX) has lost 12 percent from its May 8 peak on concern the benefits of four interest-rate cuts by the State Bank of Vietnam since March will take time to materialize. The reductions may not begin to take effect until the third quarter, Deepak Mishra, the World Bank’s head economist for Vietnam, said on May 28. Companies including Graff Diamonds Corp., Vietnam Airlines Corp., Formula One and Manchester United Ltd. have shelved or postponed planned IPOs in Asia this year amid equity- market volatility.

Rate Cuts

Vietnam’s central bank has cut refinancing, discount and repurchase rates by one percentage point every month since March to spur growth after the economy expanded at the slowest pace since 2009 and earnings at the 303 companies on the VN Index sank 12 percent in the first quarter. Still, the VN Index is up 23 percent this year, making it Asia’s best performer. The gauge dropped 0.4 percent to 431.15 at 9:28 a.m. local time.

BIDV raised 1.58 trillion dong ($75.5 million) selling 84.8 million shares at an average price of 18,583 dong in its IPO in December. The bank registered last month to list all of its 2.3 billion outstanding shares on the country’s main bourse, 97 percent of which will be restricted, Tung said. It expects the stock to begin trading at least 150 percent higher than its IPO price, he said. That would be about 27,800 dong.

Investors are “still cautious and looking for improvement in corporate earnings before turning bullish on Vietnam,” Attila Vajda, a broker at ACB Securities Ltd., the country’s third-largest brokerage, said in an interview on June 18. “The market is not at its best now, so they should list after the second-quarter and third-quarter earnings come out, because those should be better than the first quarter.”

Companies have to release earnings within 20 days of the end of each quarter, Vajda said.

Slowing Growth

Gross domestic product grew 4 percent in the first quarter, the slowest since 2009. The economy is forecast to expand 5.2 percent to 5.5 percent this year, Deputy Minister of Planning & Investment Cao Viet Sinh said in an interview this month.

The nation’s stocks may rally in the second half as companies take advantage of lower borrowing costs, Alan T. Pham, chief economist at VinaCapital Group, said in an interview last week. Lending rates may fall to about 13 percent by the third and fourth quarters, from as high as 18.5 percent now, he said.

The deposit cap was cut to 9 percent from 11 percent on June 11, giving banks more room to lower funding costs.

“Macro signals will turn into specific numbers in the third quarter,” BIDV’s Tung said. “We expect interest rates to fall further to a reasonable level for businesses to expand operations.”

The government will succeed in curbing inflation to less than 10 percent this year, he said.

Foreign Investment

Vietnam’s inflation slowed to 8.34 percent in May from a peak of 23.02 percent in August 2011, according to data from the General Statistic Office in Hanoi.

State Bank of Vietnam Governor Nguyen Van Binh said last week that the country wants to “draw more foreign investment to the banking sector” and will consider raising the foreign- ownership cap on a case-by-case basis before finalizing new rules. The government is considering raising the cap for some local banks, Le Minh Hung, deputy governor of the State Bank of Vietnam said May 29. Foreigners can currently own a combined 30 percent of a bank’s registered capital.

“We think that competitiveness among banks will be more severe, especially when foreign banks are able to increase their participation,” Tung said.

Rating Outlook

BIDV’s total assets will rise 10 percent from the beginning of this year to 455 trillion dong by June 30, Tung said. Total outstanding loans may rise 12 percent to 310 trillion dong and total deposits expand 12 percent to 319 trillion, he said.

Standard & Poor’s revised the outlook on BIDV’s credit rating to stable from negative this month.

Since July 2011, companies have to commit to list shares on an exchange within one year of an IPO, Nguyen Son, head of market development at the country’s State Securities Commission, said by phone yesterday.

Joint-Stock Bank for Foreign Trade of Vietnam shares began trading about 18 months after their IPO in December 2007, while Vietnam Joint-Stock Commercial Bank for Industry and Trade had its debut more than six months after shares were sold in December 2008.

To contact Bloomberg News staff for this story: Nguyen Kieu Giang in Hanoi at giang1@bloomberg.net

To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net


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